The June unemployment figure was 4.4% as America added 222,000 jobs. As it turns out, the labor market is so strong that many companies find they are running out of people to take open positions, and this is driving labor costs up.
According to Stuart Mackintosh, president of the National Association for Business Economics:
“The results of the most recent NABE Business Conditions Survey show more widespread increases in sales, profit margins, hiring, and capital spending in the second quarter of 2017 than in the first quarter of the year. Materials cost pressures appear to be easing, but more firms are facing higher labor costs and difficulty in hiring, especially skilled labor. Expectations for economic growth have moderated since the previous survey, but 60% of respondents still expect real GDP growth above 2% in the coming four quarters.”
The study covers responses from 101 of the Association’s members and was taken between June 15 and June 28. The results cover expectations for the second half of the year.
Part of the reason may be the strength of sales at many of the companies represented in the study. Half of those surveyed said sales rose in the second quarter. Only 17% said theirs had fallen.
The demand for workers forced many of the companies to train internal candidates. However, this was not enough to offset the need to look outside for workers. This, in turn, ate into margins, according to the Association:
Labor costs have the largest negative impact on 2017 year-to-date profits for U.S.-based operations in this survey: 34% of panelists report a negative impact on firm profits/net income from labor costs.
Many economists view a jobless rate of 5% or less as “full employment.” Their reasoning is that some portion of the work force is between jobs but will be quickly hired, and that other people have left their jobs for personal reasons but will also rejoin the workforce quickly. If this is accurate, the pressure on companies to find new workers may be at its most challenging point in years. The jobless rate is currently at a 16-year low. Few experts expect a jump in the jobless rate in the near future.
The employment situation in America is so robust that it ironically has started to hurt employers.